ITO, Chittoor V. M/s G Rajendra Naidu & Bros., Chittoor

ITA 1690/HYD/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59112 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 24-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: K NEERAJA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER. ITA NO.1690/HYD/2008 (ASSESSMENT YEAR 2005-06) INCOME - TAX OFFICER, WARD - 1, CHITTOOR. V/S. M/S. B.RAJENDRA NAIDU & BROS. CHITTOOR. (PAN-GIR NO. SB 0547 ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.SRINIVAS RESPONDENT BY : SMT. K.NEERAJA DATE OF HEARING 12. 1.2012 DATE OF PRONOUNCEMENT 12.01.2012 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) TIRUPATI DATED 30.9.2008, FOR THE ASSESSMENT YEAR 2005-06. 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL ARE AS FOLLOWS- 1. THE ORDER OF THE CIT(APPEALS) IS ERRONEOUS BOTH IN LAW AND FACTS. 2. THE CIT(A) OUGHT NOT TO HAVE ALLOWED THE APPEAL OF THE ASSESSEE STATING THAT THE ASSESSEE NEVER OWNED THE LAND. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT TH AT THE PARTNERS DID NOT INTRODUCE THE VALUE OF THE LAND, A S IT WAS AN ANCESTRAL PROPERTY. 4. THE CIT(A) DID NOT CONSIDER THE FACT THAT LAND A ND BUILDING CANNOT BE SEPARATED FOR SALE ON A FUTURE DATE. 5 ITA NO.1690/HYD/2008 M/S. B.RAJENDRA NAIDU & BROS. CHITTOOR. 2 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE FIRM IS ENGAGED IN THE BUSINESS OF RUNNING CINEMA THEATRES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS CONSTRUCTER CINEMA THEATRES ON THE LAND OWNED BY TH E HUF OF WHICH THE PARTNERS OF THE ASSESSEE-FIRM ARE COPARCENERS. ON DISSOLUTION OF THE ASSESSEE-FIRM ON 31.8.2004, THE ASSESSING OFFICER, OBSERVING THAT THE ASSETS AND LIABILITIES OF THE ASSESSEE-FIRM WERE TRANSFERR ED TO THE PARTNERS OF THE FIRM AND THAT THE ASSESSEE-FIRM HAS RELINQUISHED IT S RIGHTS ON THE THEATRE BUILDINGS TO THE HUF OF WHICH THE PARTNERS OF THE A SSESSEE-FIRM ARE THE COPARCENERS, HAS WORKED OUT THE LONG TERM CAPITAL GAINS ON THE BASIS OF THE VALUE OF THE LAND (ON WHICH THE THEATRES WERE CONST RUCTED) AS ON 1.4.1981 AS PER SUB-REGISTRAR OFFICE RECORDS AND BROUGHT THE SAME TO TAX IN THE HANDS OF THE ASSESSEE-FIRM. HE, THUS BROUGHT TO TAX LONG TERM CAPITAL GAINS WORKED OUT AT RS.2,51,16,000, WHILE COMPLETING THE ASSESSMENT ON A TOTAL INCOME OF RS.3,43,966 (EXCLUDING LONG TERM CAPITAL GAINS DETERMINED AS ABOVE), VIDE ORDER OF ASSESSMENT DATED 28.12.2007 UNDER S.143(3) OF THE ACT. 4. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMI TTED THAT THE LAND IN QUESTION WAS NEVER OWNED BY THE FIRM, AND H ENCE THE QUESTION OF TRANSFER OF THE SAME UNDER S.45(4) OF THE ACT DID N OT ARISE. IT WAS ALSO SUBMITTED THAT THE LAND WAS NEVER SHOWN IN THE BALA NCE SHEET AS EVER OWNED BY THE ASSESSEE-FIRM. IT WAS ALSO SUBMITTED THAT THE PARTNERS OF THE FIRM NEVER INTRODUCED THE VALUE OF THE LAND AS THEI R SHARE CAPITAL. IT WAS ARGUED FURTHER THAT ON VERIFICATION BY THE ASSESSIN G OFFICER HIMSELF WITH THE MUNICIPAL RECORD, THE LAND WAS FOUND TO BE REGISTER ED IN THE NAME OF G.RAJENDRA NAIDU AND SONS WHICH ITSELF PROVES THA T THE LAND DID NOT BELONG TO THE FIRM G.RAJENDRA NAIDU & BROTHERS. THE ASSESSEE ALSO FILED BEFORE THE CIT(A) COPY OF THE PARTITION DEED DATED 30.07.1945, SO AS TO SUBSTANTIATE ITS CLAIM THAT THE LAND BELONGED TO TH E HUF OF WHICH PARTNERS OF THE ASSESSEE FIRM WERE COPARCENERS. IN VIEW OF THE SE CONTENTIONS OF THE ASSESSEE BEFORE HIM, THE CIT(A) CALLED FOR THE COMM ENTS OF THE ASSESSING ITA NO.1690/HYD/2008 M/S. B.RAJENDRA NAIDU & BROS. CHITTOOR. 3 OFFICER THEREON. IN RESPONSE, ASSESSING OFFICER SU BMITTED HIS REMAND REPORT DATED 19.8.2008, REITERATING HIS FINDINGS AND SUBMI TTING THAT THE CONTENTIONS OF THE ASSESSEE BEFORE THE CIT(A) ARE L IABLE TO BE REJECTED. THE CIT(A), AFTER GIVING THE ASSESSEE AN OPPORTUNITY TO THE ASSESSEE TO HAVE ITS SAY IN THE LIGHT OF THE REMAND REPORT OF THE ASSESS EE, AND CONSIDERING THE CONTENTIONS OF BOTH THE PARTIES, CONCLUDED THAT THE ASSESSEE FIRM WAS NEVER THE OWNER OF THE LAND IN QUESTION AND SINCE THE ASS ESSING OFFICER ALSO HAS NOT BROUGHT ON RECORD ANY MATERIALS TO PROVE THE OW NERSHIP OF THE SAID LAND BY THE ASSESSEE-FIRM, THERE IS NO CASE FOR INVOKING THE PROVISIONS OF S.45(4) AND TAXING THE DEEMED CAPITAL GAINS IN THE HANDS OF THE FIRM. 5. WE HEARD THE PARTIES AND PERUSED THE MATERIAL O N RECORD. IT IS AN UNDISPUTED FACT THAT THE LAND IN QUESTION WAS AL L ALONG OWNED BY THE HUF, OF WHICH THE PARTNERS OF THE ASSESSEE FIRM ARE THE COPARCENERS. THE PARTNERS HAVE NOT INTRODUCED THEIR SHARES IN THE L AND IN QUESTION AS THEIR CAPITAL IN THE FIRM. THE FIRM NEVER CLAIMED ITSELF TO BE THE OWNER OF THE LAND, NOR REFLECTED THE SAME AS SUCH IN ITS BALANCE SHEET OR ANY OTHER RECORDS. THE LAND IN QUESTION ALL ALONG CONTINUED TO BE OWNED BY THE HUF OF THE PARTNERS. IN THE CIRCUMSTANCES, THE QUESTION OF DEEMING ANY TRANSFER OF THE LAND BY THE PARTNERS TO THE FIRM, OR ITS TRA NSFER BACK ON THE DISSOLUTION OF THE FIRM TO THE PARTNERS DOES NOT AR ISE, AND CONSEQUENTLY, NO CAPITAL GAINS CAN BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE-FIRM BY INVOKING THE PROVISIONS OF S.45(4) OF THE ACT. THE CIT(A) HAS PASSED A WELL REASONED ORDER AND WE FIND NO INFIRMITY IN THE SAME . WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUNDS OF T HE REVENUE IN THIS APPEAL. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 12.01.2012 SD/- SD/- (ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER. ACCOUNTANT MEMBER. ITA NO.1690/HYD/2008 M/S. B.RAJENDRA NAIDU & BROS. CHITTOOR. 4 DATED 12TH JANUARY, 2012 COPY FORWARDED TO: 1. M/S. B.RAJENDRA NAIDU & BROS. D.NO.11-438, O.T.K . ROAD, CHITTOOR. 2. INCOME - TAX OFFICER WARD - 1, CHITTOOR . 3. COMMISSIONER OF INCOME-TAX(APPEALS) TIRUPATI 4. COMMISSIONER OF INCOME - TAX, TIRUPATI 5. THE D.R., ITAT, HYDERABAD. B.V.S